Capping Appropriations: Administration's Proposal Regarding Discretionary Caps Likely to Prove Inequitable and Ineffective

Publication Date: March 2004

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Richard Kogan

Research Area: Banking and finance

Keywords: Economic projections; Tax code; Economic inequality; Income diversity

Type: Report

Abstract:

In its budget, the Administration proposes establishing caps, or statutory limits, on the total cost of programs (known as “discretionary programs”) whose funding is determined by annual appropriations bills. These caps would cover a little less than two-fifths of the budget. (The remaining three-fifths is made up of entitlements such as Social Security and Medicare and interest payments on the debt.)

The caps the Administration has proposed are very tight and would necessitate deep cuts in domestic discretionary programs. Of particular note, the caps would not be accompanied by comparable fiscal restraint elsewhere in the budget. They would not be part of a larger plan to reduce projected deficits.

To the contrary, the administration continues to propose the permanent extension of expensive tax cuts and also is calling for additional tax cuts. Both OMB data and a new Congressional Budget Office analysis show that, taken as a whole, the Administration’s budget proposals would make projected deficits larger, not smaller, than they otherwise would be. As a result, the savings from the cuts in discretionary programs that the proposed caps would require would effectively be used to finance a modest portion of the cost of the tax cuts, which primarily benefit the most well-off, rather than to rein in deficits in conjunction with tax and entitlement changes that produce further savings. Caps that are established to finance tax cuts rather than reduce deficits and that are as harsh as the caps the Administration has proposed do not represent equitable or sound public policy.